The Government's Funding for Lending scheme has so depressed savings rates
that customers are not bothering to switch accounts, a leading comparison
site said today.

Moneysupermarket finance officer Paul Doughty said that, because banks can now get cheap finance from the Governemnt they are offering less attractive savings rates. "Demand from savers switching to the best available rates has been impacted," he concluded.

The Government scheme, which was meant to help small businesses and first-time buyers, allows banks to borrow money very cheaply from the Government so long as they meet lending targets. However, experts argue that this has had a disastrous effect on savers.

This is because the banks no longer need savers' money to lend out, so they do not need to entice them in with good rates. According to Moneyfacts, the number of accounts with an attractive introductory bonus fell sharply after August 2012, when the scheme was introduced.

"We now have less choice than we had four months ago, the rates are very much poorer and to add insult to injury, the introductory bonus has all but disappeared as banks shy away from attracting the attention of desperate savers," said Sylvia Waycot from Moneyfacts. "Providers no longer needing savers' money to prop up bank balances, thanks in part to the Government's Funding for Lending Scheme, have started streamlining their accounts."

Savings provider Governor Money, which launched 18 months ago, has just shut down,blaming the scheme as a key factor behind its demise. The company's chief executive Miles Bingham said: "It is disappointing that we are having to take this measure. however, given the current savings environment and the reluctance of banks and building societies to offer appealing rates to savers, this has made Governor's continuation unviable.